Companies start dash for cash to beat new Covid lockdown crisis

The race for companies to raise cash to see out the new lockdown began today as rail tickets website Trainline and pubs operator Mitchells & Butlers both revealed plans to tap investors. 

Trainline is to raise £150 million through a convertible bond while M&B — behind the All Bar One and Harvester chains — said it may seek an emergency cash raise after sales plummeted by more than two-thirds in the first quarter.  

Between March and May 2020, nearly 150 British firms raised £30 billion in the City by tapping bond and stock markets, according to analysis by New Financial and BNP Paribas. Premier Inn owner Whitbread, JD Wetherspoon and catering giant Compass all made major share sales to raise funds. 

In November Trainline, whose 2019 IPO was one of the most successful in the UK, recorded a loss of £87.5 million, against £11.1 million the year before as train travel all but ceased during lockdowns. It today said it was seeking to protect itself from “an extended Covid downturn scenario” and offer “greater flexibility to invest in possible future growth opportunities”. 

If the bond issue completes, Trainline will get a further extension of its covenant waiver with banks to 2022. 

Convertible bonds, popular before the financial crash, have fallen out of favour in the UK in recent years although they have rebounded strongly in the US and Europe.  As companies in hard-hit hospitality, leisure and travel faced cash crises when the pandemic hit last year, most opted for simple equity raises.

M&B — which went into the pandemic as one of the largest and strongest listed firms in the hospitality sector — said in a trading statement today that as the future facing the sector remains “extremely uncertain”, bosses believe it is “prudent to explore an equity capital raise” to “give the group increased financial and operational flexibility”. 

The FTSE 250 firm said no decision has yet been made with regards to the timing, size, or terms of a raise.

In November M&B reported crashing to a pre-tax annual loss of £123 million, down from a profit of £177 million in 2019.

New closures mean it is currently burning through up to £40 million per month before servicing debts — with a debt service payment date due in mid-March. The firm added that it currently has a cash balance of £125million, with all credit facilities drawn.

Chief executive Phil Urban added that the furlough scheme is merely “temporarily protecting some employment” and that there is urgent need for more Government support “for businesses themselves” if firms are to bounce back.

He said: “Mitchells & Butlers was a high performing business going into the pandemic and with the support of our main stakeholders I have every confidence that we can emerge in a strong competitive position once the current restrictions on us are lifted.”